The WCI scenario simulator is designed to model the demand and supply for the linked California-Quebec program. The Western Climate Initiative represents one of the most mature and liquid carbon markets globally, with California and Quebec operating a fully linked cap-and-invest system that establishes a common allowance market across jurisdictions. The WCI market plays a central role in North American carbon pricing dynamics, with California Carbon Allowances (CCAs) serving as the primary compliance instrument under the program. Market participants include covered entities from the power, industrial, fuels, and natural gas distribution sectors, all of which are subject to declining emissions caps aligned with long-term climate targets. Over time, the WCI market has evolved through periodic regulatory updates, cap trajectory adjustments, and refinements to allocation methodologies, all of which influence allowance supply availability, demand expectations, and long-term price trajectories. As regulatory ambition increases, the importance of forward-looking modelling tools becomes more significant for covered entities, financial participants, and other market stakeholders seeking to evaluate the implications of policy changes on compliance cost exposure and procurement strategies. The model allows users to view the demand/supply output from various scenarios, enabling a structured assessment of how regulatory developments may affect allowance bank levels, annual deficits, and price formation dynamics over the medium to long term horizon.

Recent policy developments have introduced material changes to the future supply trajectory of allowances under the California Cap-and-Invest program, particularly through the Initial Statement of Reasons released in January 2026. The ISOR introduces structural adjustments including an inventory adjustment of allowances across the 2027 to 2030 period, revisions to allocation distribution, and updates to reporting requirements under the Mandatory Reporting Regulation. These changes collectively influence the balance between allowance supply and covered emissions, thereby affecting long-term market fundamentals. Understanding the implications of these regulatory adjustments requires scenario-based modelling that can incorporate policy-driven changes while maintaining transparency around modelling assumptions. This version has two scenarios:

CA ISOR : The scenario basis the supply changes proposed in the Jan 2026 ISOR.

CA ISOR + WA : Incorporates supply trajectory from ISOR and assumes linkage with Washington in 2028.

The inclusion of a linkage scenario reflects the growing relevance of potential market integration between California and Washington’s cap-and-invest programs. Linkage introduces the possibility of allowance fungibility across jurisdictions, which may accelerate bank drawdown depending on relative demand and supply conditions across markets. The structure and timing of linkage could influence price convergence dynamics, liquidity depth, and cross-market compliance behavior. Scenario modelling therefore provides insight into how linkage may influence surplus allowance balances and long-term price stability across the broader WCI system.

Our Analytics Pro Clients also have access to our Interactive Datasheets for WCI which enable more detailed fine tuning of modelling inputs. These datasheets allow users to modify key assumptions including emissions trajectories, sector coverage changes, allowance budgets, and compliance behavior parameters, enabling a more granular evaluation of market outcomes under alternative policy environments. Please contact us if you have not received access for the same.

Model Change Log:

This version of the simulator incorporates updated scenarios from CARB's January 2026 ISOR and latest 2024 MRR release from California and Quebec. The incorporation of updated Mandatory Reporting Regulation data improves the alignment between reported emissions and projected compliance demand, ensuring consistency between historical emissions trends and forward modelling assumptions. By integrating regulatory updates and emissions data revisions, the simulator provides a structured analytical framework for evaluating how policy adjustments influence allowance availability, market balance, and potential price pathways within the WCI carbon market.